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It becomes the third bank to fall in as many months.
Reserve Bank of Zimbabwe senior division chief: Banking Licencing, Supervision and Surveillance Mr Norman Mataruka, last night said onsite investigations by the central bank had unearthed gross irregularities indicating the bank was beyond redemption.
Royal, which was reissued with a licence two years ago, had a capital base of $1,9 million against the requisite $12,5 million for commercial banks and cumulative losses of $6 million to June 2012 rendered the bank insolvent.
“The surrender of the licence followed a Reserve Bank of Zimbabwe’s determination that Royal Bank was no longer in a safe and sound financial condition.
The institution has failed to maintain the prescribed minimum amounts of capital and reserves in violation of the Banking Act and has failed to conduct banking business in accordance with sound administrative and accounting practices and procedures, adhering to proper risk management policies,” said a statement issued by RBZ Governor Dr Gideon Gono last night.
Briefing journalists in Harare, Mr Mataruka described the bank’s shareholders and directors as unrepentant, abusing funds in the same manner that saw the bank collapse in 2004.
He immediately ruled out banking sector instability, stressing that the closure of Royal left the banking sector in better stead.
“Its deposit of $5,8 million is a fraction of $3,5 billion total deposits in the banking sector and its market share was at 0,00 something so it will have no effect in terms of the stability of the banking sector. It is akin to having a toothache that bothers you. The moment it is removed you feel better and can sleep well,” said Mr Mataruka.
In a letter to the central bank, Royal Bank chairman Dr Peter Chikumba said:
“Following our meeting this morning (yesterday), we advise that the board of directors have resolved on the option to voluntary surrender the bank’s licence.
Founder and chief executive Mr Jeff Mzwimbi could not be reached for comment.
Speaking from Nyanga yesterday where he was attending the Confederation of Zimbabwe Industries Conference yesterday, RBZ Governor Dr Gono said a full statement on the investigations and findings would be issued on Monday “after consulting my principals, President Mugabe and the Minister of Finance Tendai Biti”.
However, indications last night were that the central bank would press criminal charges against the directors and shareholders of the bank.
The central bank, in conjunction with the Deposit Protection Corporation, would soon institute liquidation proceedings to facilitate payments to depositors and other creditors.
Mr Mataruka said 99,2 percent of the bank’s portfolio was not performing while external shareholders had refused to sign off its accounts since December last year.
Revelations last night were that the bank had also failed to meet Real Time Gross Settlement (RTGS) payments amounting to$1,3 million.
Furthermore, Royal Bank did not have a core banking IT system, among its operational deficiencies.
The bank’s closure falls hard on the heels of Interfin Bank’s placement under curatorship and Genesis Investment Bank voluntary surrender of its banking licence after failing to meet minimum capital thresholds.
Interfin was placed under the curatorship of Mr Peter Bailey of KPMG Chartered Accountants after the central bank determined the bank was not in a safe and sound financial condition.
Royal Bank was founded in 2001 but three years later, the central bank closed it together with Barbican Bank and Trust Banking Corporation for engaging in non-permissible activities. The banks were later merged, to form Zimbabwe Allied Banking Group.
Online Reporter